Brief Synopsis

As Iran edges closer to acquiring a nuclear bomb and its missiles extend an ever darker diplomatic shadow over the Middle East and Europe, Iran is likely to pose three threats. First, Iran could dramatically up the price of oil by interfering with the free passage of vessels in and through the Persian Gulf as it did during the l980s or by threatening to use terrorist proxies to target other states' oil facilities. Second, it could diminish American influence in the Gulf and Middle East by increasing the pace and scope of terrorist activities against Iraq, Saudi Arabia, other Gulf states, Israel, and other perceived supporters of the United States. Finally, it could become a nuclear proliferation model for the world and its neighbors (including many states that otherwise would be more dependent on the United States for their security) by continuing to insist that it has a right to make nuclear fuel under the Nuclear Nonproliferation Treaty and then withdrawing once it decides to get a bomb. To contain and deter Iran from posing such threats, the United States and its friends could take a number of steps: increasing military cooperation (particularly in the naval sphere) to deter Iranian naval interference; reducing the vulnerability of oil facilities in the Gulf outside of Iran to terrorist attacks, building and completing pipelines in the lower Gulf region that would allow most of the non-Iranian oil and gas in the Gulf to be exported without having to transit the Straits of Hormuz; diplomatically isolating Iran by calling for the demilitarization of the Straits and adjacent islands, creating country-neutral rules against Nuclear Nonproliferation Treaty state members who are suspected of violating the treaty from getting nuclear assistance from other state members and making withdrawal from the treaty more difficult; encouraging Israel to set the pace of nuclear restraint in the region by freezing its large reactor at Dimona and calling on all other states that have large nuclear reactors to follow suit; and getting the Europeans to back targeted economic sanctions against Iran if it fails to shut down its most sensitive nuclear activities.